During the past week we’ve described various investment activities in senior housing that demonstrate the appeal of these assets. We’ve discussed how industry participants and domestic and foreign investors are all trying to take advantage of today’s low interest rates and demand for senior housing services by ramping up their investments in the space via acquisitions, joint ventures, and other transactions. On the domestic side, we’ve also talked about how some providers are implementing strategies based on growth through acquisitions to grow their portfolios and on the international front, we’ve discussed how foreign investors are increasing their holdings in the space by purchasing senior housing assets and by utilizing the federal government’s Immigrant Investor Program. We’re now going to conclude this discussion with some additional examples of purchase activity that further demonstrate the appeal of senior housing assets. While interest rates remain low and a number of attractive opportunities still exist to invest in the space, senior housing providers and others who are interested in taking advantage of this situation should continue to look to the Chicago-based financing firm Cambridge Realty Capital for their capital needs in financing acquisitions, joint ventures, and other wealth generating transactions.
Growth Through Acquisitions
The Ensign Group is one of the companies that has implemented a strategy of growth through acquisitions. It has stated as much and it has also demonstrated this by purchasing a number of properties in the Western states during the first part of the year. In addition to these purchases, just last week the Ensign Group also closed on its purchase of Mt. Ogden Health and Rehabilitation Center in Ogden, Utah. This property is a 108-bed skilled nursing facility that has been operated by an Ensign subsidiary since July 2006, and because of this Ensign was very familiar with the property, realized the potential it had to generate significant returns, and made the decision to purchase the facility with cash. In doing so, Ensign’s President and CEO, Christopher Christensen reaffirmed that Ensign will continue to purchase additional skilled nursing, assisted living, and other healthcare related businesses across the United States as it continues its strategy of growth through acquisitions.
Foreign Investment In Senior Housing Ramps Up
In addition to the Ensign Group, the Toronto-based REIT, HealthLease Properties Real Estate Investment Trust, has also increased its senior housing assets through acquisitions. For example, HealthLease recently purchased seven senior housing facilities for a combined $102 million. Four of these facilities are skilled nursing facilities and assisted living properties that are located in North Carolina, Virginia, and Pennsylvania. HealthLease purchased them for $49.4 million at an 8.3% cap rate. The fifth facility is a 100-unit senior housing care and care community in Indiana that was developed by the Mainstreet Property Group; and lastly, HealthLease purchased the Continuum II Portfolio for $53.3 million at a 7.3% cap rate. The two properties in the Continuum II Portfolio are assisted living and independent living facilities and have 283 beds between them. HealthLease’s excitement over these acquisitions was aptly demonstrated by a statement from its Chairman and CEO, Zeke Turner. With respect to these purchases Mr. Turner stated that, “As we continue to execute on our strategic growth plan, these acquisitions continue to demonstrate the REIT’s ability to acquire high quality, current generation assets on an accretive basis for unit holders.”
Lastly, another recent foreign investment transaction took place that also demonstrates the desire of foreign parties to acquire the gains that U.S. senior housing assets are generating. In this transaction, Canadian senior living operator Revera Inc. completed a buyout of Sunrise Senior Living’s management company. With a 76% interest in Sunrise, Revera is now the majority owner and at 24%, HealthCare REIT is the minority owner. Following the buyout Sunrise will continue to operate independently and manage all of its 290 communities in Canada, the U.S., and United Kingdom under the Sunrise brand from its headquarters in McClean, Virginia. Revera’s President and CEO, Thomas G. Wellner showed his enthusiasm for this transaction with his statement that, “This strategic investment in one of the most trusted brands in seniors housing, with a strong presence in the U.S. and U.K. markets,[it] demonstrates Revera’s commitment to growth in this sector.”
As low interest rates and the industry’s strong fundamentals continue to drive domestic and foreign investment activity in seniors housing, industry participants and other who are interested in obtaining the strong returns generated by these assets via an acquisition, joint venture, or other method, should continue to look to the successful financing firm Cambridge Realty Capital for assistance in financing these transactions.
